Traders will be keeping an eye on the dollar this week with an Interest Rate Statement due out on the 29th. USDJPY could see some volatility this week with interest rate news on both sides of this currency pair.

Risk on tap for this week

Mind The Gap!

The open could be interesting and may set the tone for the week with all eyes on the European bank stress test results which have come out today. We may see some opening gaps across some of the markets.

Buyers stepped in at around the 105.50 level which was at the half way price between the lows from May and the highs at the start of September.

Buyers had it last week.

The high last week was at 108.35, close to the 61.8 and the completion of an ABCD pattern (a measured move in price where the second move in price is equal to the first move in price).

Where might the shorts get involved?

This might be an interesting area for the shorts to participate. Any break of this level, the highs are likely to be retested.

AUDUSD

This pair has consolidated for the week at the yearly lows and seems to be caught between an area of demand and supply. Last week’s price movement was within the range of the previous week.

Just going sideways

GBPUSD

Cable (the term traders use to describe this currency pair) found some interest at 1.5990 which was also near the 61.8 retracement. If price can hold above the sentiment wall from the highs on the 19th of September and the potential new channel forming, a retest of the October highs is within reason.

A possible channel?

EURUSD

Last week, EURUSD retested the highs from the previous Friday, with sellers stepping in pushing this pair down to the previous weeks low. It picked up a few orders just under the lows and has consolidated there going into the close last week. For now, 1.26 seems to be the line in the sand for the bulls, a break of this could see the yearly lows retested with the next stop the 2012 lows at 1.2040.

1.26 line in the sand.

To find out what the crowd thinks of these markets – just click on the sentiment icon on the chart in Spark Profit to get the opinion of over 90000 players from around the world.

The investment is an important milestone and a validation of Nous’s business model, which to date has been entirely self-funded. Nous’s goal is to increase its Spark Profit user base to 250,000 users in the next six months.

Nous is using the funds raised to add new markets and social features to the Spark Profit application. All of the funding has been raised from private investors, predominantly senior finance and technology professionals at global investment banks.

Justin Short, CEO of Nous, says:

“This investment is fantastic news for Nous. All of our investors will contribute not just capital, but also their considerable industry experience. We now have even stronger connections to the forward thinking hedge-funds that can make the most of our unique data feeds.”

Nous Global Markets was founded in September 2012 by Justin Short and four other former high flying Merrill Lynch traders and technologists. Originally based in Tokyo it has since relocated to London.

In January 2014, Short and his colleagues launched their free-to-play virtual trading game – ‘Spark Profit’ – which enables players to predict currency and liquid instrument movements in return for cash prizes. Spark Profit has already 84,000 users in 200 separate countries, with several players expected to earn over a thousand dollars in annualized prize money through their accurate predictions.

Nous collects and processes the price prediction data, weighing in at 250,000 predictions per week, using its own proprietary software, and has created data feeds which it is marketing to hedge funds, banks and other financial institutions. It is in discussion with potential clients about pilot schemes to assess how Nous’ data can enhance their internal systems and strategies.

A key strength of Nous’s crowdsourced data is that it is generated without interpreting natural language responses, unlike some firms that analyze text such as comments on Twitter and Facebook to monitor consumer sentiment. Nous describes its product as “perfectly quantified intuition”.

The greater the player base, the higher the value of the data generated from its data feeds. The feeds give financial institutions the ability to understand – and even accurately anticipate – market price changes at multiple time scales, including much shorter ones than are served by traditional analysts.

Nous was founded in 2012 by Justin Short and four other former high flying Merrill Lynch traders and technologists, who saw an opportunity for professionals to better understand and predict financial markets, and to empower people around the world to discover their trading talents. It launched Spark Profit, the free-to-play virtual trading game, in January 2014.

This is the first of our weekly wraps where we review what has happened during the week, apply some simple analysis to the charts and highlight some of the risk on tap for next week.

The highlights this week, from a fundamental risk point of view, were the unexpected results for Industrial Production, Philly manufacturing and Unemployment claims coming out of the US on Thursday. These caught market participants by surprise.

One of the common themes you will notice in most of the charts is that there seems to have been a sentiment change towards the end of the week. We don’t know if this will continue.

USDJPY

The week started with the bears firmly in control but the bulls have had the upper hand for the last two days. Given the moves we have had over the last year with Yen, a deeper correction to 103 may be on the cards.

However, this week, buyers came in at the half way back coinciding with an old high from the end of 2013 and for now, although the week is closing bearish, buyers are setting the tone on this pair into the close this Friday.

Buyers came in at the half way back

EURUSD

We are at a key demand level for the euro looking at the longer term chart. Although the week is closing bullish, the last two days have seen some dollar strength

Demand level on the EURO

Technically, the 1.28 is the line in the sand here.

1.28 line in the sand for buyers

GBPUSD

This market closed higher then the open after a battle where the bears sold it down over 200 pips before buyers stepped in. 1.60 could be the line in the sand for the bulls. We are at the half way back of the move from the lows of 2013 and this level was well defended by buyers last year, albeit in a bull market at the time. If history is anything to go by, we can probably anticipate some consolidation here.

Either way, the bulls have it on cable going into the close this Friday. This could easily pop up and squeeze those shorts next week.

GBPUSD closes above the weekly open.

AUDUSD

This pair has found some support at the yearly lows this week and right now is consolidating. The yearly low looks like it is the line in the sand, with the next stop 0.80 if sellers have their way.

Year lows defended.

The price action this week has been range bound – caught in the range set by last week.

Caught in the range

Gold

Buyers have stepped in defending the 2013 lows this month. This was the price where, in July 2010, after about a five week decline in the precious metal, buyers stepped in resulting in the impulsive move to the metals highs.

Gold lows defended

This week, and the previous week, have closed with the buyers firmly in control. The lows from late May in 2013 are proving a bit sticky at the moment. If the bulls can keep it going, 1280 could be on the cards. For now, 1248 (this weeks high) is the line in the sand for the bears. Should this breaks, buyers may push this metal to the next area of supply around 1280.

This weeks high the line in the sand for the bears

Crude

No winners this week on this market – oil closed almost exactly on the half way mark of this weeks range. We are now testing previous support (turned resistance?) – looks like the weeks high of 84.75 is the level to watch going into next week.

Oil – buyers need to clear resistance before price becomes inpulsive

S&P Index

There has been blood on the streets over the last month with most of the world’s stock indexes taking a hammering. Looking at the longer term chart, it is within the bounds of reason to think there may be more downside before buyers step in.

More downside?

This week we have seen some buying coming in with price retesting the low from early august which was also at the 38.1 Fibonacci. This seems like a pretty good place for shorts to reload and the week has closed nearby. The half way back also looks attractive and this market may still rise, shaking out the early shorts before dropping to retest the lows.

If you were a seller, at what price would you get involved?

Risk on tap for next week

USD

Core CPI Wed Oct 22

Unemployment Claims Thurs Oct 23

New Home Sales Fri Oct 24

EUR

French and German Manufacturing PMI Thurs Oct 23

AUD

Interest Rate Minutes Tues Oct 21

CPI Wed Oct 22

If you would like to know what the crowd is thinking about where a market is going to go – just click the sentiment icon on the chart in Spark Profit and we’ll tell you right away.

“In rising financial markets, the world is forever new. The bull or optimist has no eyes for past or present, but only for the future, where streams of revenue play in his imagination” – James Buchan

We just can’t help ourselves. We open a chart, take a look at where price is now and, regardless hit that BUY button. It would seem most of us are overly optimistic when it comes to estimating the markets (and most things in life). This optimism is reflected in the trading behaviours of the majority of the crowd in Spark Profit – we tend to be bulls!

Being bullish, or bearish, are terms used to describe the actions and outlook of a trader or a market. A bull market describes a market which is rising on a wave of optimism. A bear market declines on selling pressure as people rush to the exit to offload their investments.

Many of us are naturally bullish on the markets.

The bulls

The glass is definitely half full with this bunch. Everything is great, the economy is improving and the only way is up! What could possible go wrong? The image of the bull comes from the way the bull attacks – a bull will thrust up with its horns in the air – this action being the metaphor for a rising market.

The Bears

For a bear, the only way is down and fast. A bear’s glass is definitely half empty. Bears are no fun at parties – at least not to Bulls. The image of the bear comes from the way the bear behaves – a bear moves slowly and attacks by swiping with its paw in a downward direction.

The Problem.

The problem for you, as a trader, is that you want to be able to assess the markets without your own internal views skewing your trade telling you to go long when you should be short.

Whether you are a bull, or a bear, almost all traders have a natural inclination to one extreme or the other. Even some of the most experienced traders suffer from a permanent Bullish view (or an aversion to sell). Mark Weinstein said in his interview for Market Wizards that he “never went short. I felt it was un-American”. Mark went on to say “I realized that the business I was in was the height of capitalism, and it really made no difference what side of the market you were on”

So, what to do?

Flip it! That’s right, turn that chart upside down – get a new perspective. Now, before you start turning your mobile device around in what will sure to be an endless cycle of frustration – just click the new icon on the upper left corner the next time you open a chart in Spark Profit. It will flip the chart for you – giving you a new perspective to base your decisions on. How do you feel about your chosen market now? Still feeling bullish?

The S and P index flipped. How do you feel about it now?

Regardless of whether you are a bull or a bear, don’t get into a trade until you are ready. Flip that chart and get a different perspective.

“There is only one side of the market and it is not the bull side or the bear side, but the right side” – Jesse Livermore